Forest Recovery Provisions for the Hurricanes of 2005

1
Forest RecoveryProvisions for theHurricanes of
2005

• Katrina Emergency Tax Relief Act of 2005
• Gulf Opportunity Zone Act of 2005
• Defense Appropriations Act, 2006

2
Recovery Cost-Share Programs

• The Defense Appropriations Act, 2006 (P.L.
  109-148) extended three agriculture disaster
  recovery programs to forest land in areas
  affected by the hurricanes of 2005
• 261 counties/parishes in Mississippi, Louisiana,
  Alabama, Florida, Texas, and North Carolina
  designated as primary disaster areas by both the
  President and the Secretary of Agriculture

3
Recovery Cost-Share Programs

• Emergency Watershed Protection Program
• Emergency Conservation Program
• Emergency Forestry Conservation Reserve Program

4
Emergency Watershed Protection

• The Emergency Watershed Protection Pro-gram (EWP)
  primarily supports removal of downed timber and
  construction of firebreaks
• Is available in counties/parishes affected by
  tornadic winds associated with the hurricanes
• Eligible sites are areas with a high risk for
  wildfire or associated smoke concerns,

5
Emergency Watershed Protection

• for example, forest land near urban interface
  areas, transportation corridors, or structures
• EWP reimburses 75 of the cost of supported
  practices, to a limit of 150 per acre
• Forest owners can apply at their local Natural
  Resources Conservation Service office

6
Emergency Conservation Program

• The Emergency Conservation Program (ECP)
  primarily supports removal of timber debris and
  replanting
• To qualify, a site must have lost 35 or more of
  its commercial timber value due to the hurricanes
• ECP reimburses 75 of the cost of supported
  practices (up to 100 for Rita and Katrina), to a
  limit of 150 per acre

7
Emergency Conservation Program

• ECP payments cannot exceed 200,000 per person,
  per disaster and cannot be for practices paid for
  by another Federal program
• Forest owners can apply at their local Farm
  Services Agency office

8
Emergency Forestry CRP

• The Emergency Forestry Conservation Reserve
  Program (EFCRP) primarily supports restoration
  and replanting
• To qualify, a site must have lost 35 or more of
  its commercial timber value due to the hurricanes
• EFCRP enrollment offers are ranked based on their
  potential to prevent soil erosion, improve water
  quality,

9
Emergency Forestry CRP

• restore wildlife habitat, and mitigate
  economic losses caused by the hurricanes
• Foresters help landowners with accepted offers to
  develop conservation plans
• Participating landowners receive a 50 cost-share
  for practices called for in the plan, plus a land
  rental payment in a lump sum or 10 annual payments

10
Emergency Forestry CRP

• For 10 years, no timber can be harvested from
  enrolled land without agency approval
• Forest owners can apply at their local Farm
  Services Agency office

11
Recovery Cost-Share Programs

• EWP, ECP, and EFCRP can be stacked if they are
  used for different timber practices
• Owners should be aware that the new timber
  practices are in competition with traditional
  agriculture practices for the available funds

12
Recovery Cost-Share Programs

• In all three cases, the original agriculture
  programs are approved for exclusion from gross
  income under IRC section 126
• EWP, ECP, and EFCRP cost-shares used for capital
  expenses can be excluded from gross income
  (although they MUST be reported)
• EFCRP land rental payments CANNOT be excluded

13
Gulf Opportunity Zone Provisions

• The Gulf Opportunity Zone Act of 2005 (P.L.
  109-135) included two provisions for forest
  owners in 132 counties/parishes that make up
  three Gulf Opportunity Zones
• The Gulf Opportunity Zone (GO Zone)91
  counties/parishes in Mississippi, Louisiana, and
  Alabama designated as the core disaster area for
  Hurricane Katrina

14
Gulf Opportunity Zone Provisions

• The Rita GO Zone17 Louisiana parishes included
  in the GO Zone, plus an addl 28
  counties/parishes in Louisiana and Texas
  designated as the core disaster area for
  Hurricane Rita, and
• The Wilma GO Zone13 counties in Florida
  designated as the core disaster area for
  Hurricane Wilma

15
Increased Reforestation Deduction

• For qualifying forest owners, the annual
  reforestation deduction (10,000 or 5,000 for
  married persons filing separately) is increased
  by the amount of qualified reforestation expenses
  incurred during the year, to a limit of 10,000

16
Increased Reforestation Deduction

• Qualifying forest owners includes those who
  owned 500 acres or less of forest land at all
  times during the year, and
• Are not a corporation with publicly-traded stock
  or a real estate investment trust

17
Increased Reforestation Deduction

• Qualified reforestation expenses includes those
  incurred after
• Aug. 27, 2005, if any of part the property is
  located in the GO Zone,
• Sep. 22, 2005, if any part of the property is
  located solely in the Rita GO Zone,
• Oct. 22, 2005, if any part of the property is
  located in the Wilma GO Zone, and
• Before Jan. 1, 2008

18
Enhanced NOL Carryback

• The provision permitting farmers to carry the
  portion of a net operating loss (NOL) due to
  income and deductions attributable to their
  business back to the 5 tax years before the NOL
  year is extended to qualifying forest owners with
  qualifying timber property
• This provision does not apply after 2006

19
Enhanced NOL Carryback

• Qualifying forest owners includes those who
• Held the qualifying timber property on Aug. 28,
  2005, if any portion of the property is located
  in the GO Zone
• Held the qualifying timber property on Sep. 23,
  2005, if any portion of the property is located
  solely in the Rita GO Zone

20
Enhanced NOL Carryback

• Held the qualifying timber property on Oct. 23,
  2005, if any portion of the property is located
  in the Wilma Go Zone
• Owned 500 acres or less of forest land at all
  times during the year, and
• Are not a corporation with publicly-traded stock
  or a real estate investment trust

21
Enhanced NOL Carryback

• Timber property qualifies if any part of it is
  located in the GO Zone, the Rita GO Zone or the
  Wilma GO Zone, and the income and deductions are
  allocable to the part of the tax year after
• Aug. 27, 2005, if any of part the property is
  located in the GO Zone,

22
Enhanced NOL Carryback

• Sep. 22, 2005, if any part of the property is
  located solely in the Rita GO Zone, or
• Oct. 22, 2005, if any part of the property is
  located in the Wilma GO Zone

23
GO Zone (Katrina) Provisions

• The Katrina Emergency Tax Relief Act of 2005
  (P.L. 109-73) and Gulf Opportunity Zone Act of
  2005 (P.L. 109-135) included four provisions for
  taxpayers engaged in the active conduct of a
  trade or business that may benefit forest owners

24
GO Zone (Katrina) Provisions

• These provisions are only available to taxpayers
  in the 91 counties/parishes in Mississippi,
  Louisiana, and Alabama designated as the GO Zone
  (Katrina)
• They are not available to taxpayers in the Rita
  GO Zone or the Wilma GO Zone

25
GO Zone (Katrina) Provisions

• Increased replacement period for property lost in
  an involuntary conversion (KETRA)
• 50 depreciation bonus for qualifying property
  (GOZA)
• Increased section 179 deduction (GOZA)
• Enhanced carryback provisions for net operating
  losses (GOZA)
• See www.gozoneguide.com for details